Most of the retail sector stocks traded higher today (Representational image)
The Cabinet today liberalised FDI or foreign direct investment in key sectors including allowing 100 per cent FDI under automatic route in single brand retail trading. It also allowed foreign airlines to invest up to 49 per cent under approval route in national carrier Air India. This move is expected to expedite the divestment process for Air India. It is also likely to benefit big foreign single-brand retailers such as IKEA. 100 per cent FDI in construction development via automatic route was also cleared. The decision was taken during the Cabinet meeting chaired by Prime Minister Narendra Modi. Measures taken by the government have resulted in increased FDI inflows into the country. In the financial year 2016-17, a total of $60.08 billion was received in FDI - which is an all-time high.
10 Things To Know About Key FDI Decisions Today:
- Currently, FDI up to 49 per cent is permitted under automatic route in single brand retail but beyond that limit, government nod is required.
- The government said that the decision to liberalise FDI norms would help provide ease of doing business and also lead to larger FDI inflows contributing to growth of investment, income and employment.
- "The approval through automatic route with respect to single brand retail trading will quicken the FDI clearance process as no prior government approval would be required. We expect that FDI in single brand retail trading sector will now gain further momentum due to the process not being subject to regulatory scrutiny and approval process," said Rabindra Jhunjhunwala, partner at law firm Khaitan & Co.
- The relaxation of norms for foreign airline investment in Air India is subjected to certain conditions. The government said that foreign investment in Air India including that of foreign Airline (s) shall not exceed 49 per cent either directly or indirectly and "substantial ownership and effective control of Air India shall continue to be vested in Indian National".
- According to the current FDI policy, foreign airlines are allowed to invest under government approval route in Indian companies operating scheduled and non-scheduled air transport services, up to the limit of 49 per cent of their paid-up capital. But the provision was not applicable to Air India.
- Last year, the Cabinet Committee on Economic Affairs (CCEA) gave its in-principle nod for the strategic disinvestment of Air India.
- Debt-laden Air India is staying afloat on taxpayers' money. Air India has a total debt of about Rs. 48,877 crore at the end of March 2017, of which about Rs. 17,360 crore were aircraft loans and Rs. 31,517 crore were working capital loans.
- Currently, a group of ministers is in the process of finalising the contours for the proposed strategic stake sale in the national carrier and expression of interest is likely to be invited from bidders soon.
- Among other decisions today, the Cabinet clarified that real-estate broking service does not amount to real estate business and is therefore, eligible for 100 per cent FDI under automatic route.
- The Cabinet also decided to allow foreign institutional investors (FIIs)/foreign portfolio investors (FPIs) to invest in power exchanges through primary market as well. Earlier, FII/FPI purchases were restricted to secondary market only.
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